The Dynamic Environment of International Trade. : CH: 2 The Dynamic Environment of International Trade. Presented by:
Kashif Javed Roll No. 23 1 CHAPTER OUTLINE : CHAPTER OUTLINE Global perspectives: Trade barriers-An international market minefield.
The twentieth to twenty first century:
World trade & US multinationals.
The first decade of the twenty first century & beyond.
Balance of payments
Easing the trade restriction.
General agreement on trade & Tariff - GATT 2 CHAPTER OUTLINE : CHAPTER OUTLINE World trade organization – WTO
Skirting the spirit of GATT & WTO
The international Monetary fund & world bank group
Protest against Global institutions 3 CHAPTER LEARNING OBJECTIVE : CHAPTER LEARNING OBJECTIVE Basis for reestablishment of the world following World war two.
Importance of balance of payment figure on world economy
Effect of protectionism on world trade
Seven types of trade barriers
Importance of GATT & WTO
Emergence of IMF & World bank group 4 TWENTITH TO TWENTY FIRST CENTURY : TWENTITH TO TWENTY FIRST CENTURY First half of twentieth century
World war 1 & World war 2
Last half of twentieth century
Establishment of GATT
Formation of WTO
Formation of IMF & world bank
World bank estimation regarding India, Brazil, Indonesia, china & Russia 5 WORLD TRADE & US MNCs : WORLD TRADE & US MNCs Era between 1950 to 1960
Problem faced in era of 1960
Resistance to direst investments
Increasing competition in export marketing
NIC –Newly industrialized countries
SOE –state owned enterprise 6 WORLD TRDE & US MNC,s : WORLD TRDE & US MNC,s Balance of Merchandise trade
US trade deficient
US encouraging efforts for open trade
Role model as open market
AFTA – Anemia free trade area
GATT – General agreement on tariff & trade
WTO – World trade organization
APEC – Asia pacific economic cooperation conference 7 FIRST DEACDE OF TWENTY FIRST CENTURY : FIRST DEACDE OF TWENTY FIRST CENTURY NIC – Newly industrialized countries
World bank estimation regarding new emerging countries
Brazil, India & Indonesia
OECD – Organization of economic cooperation devolvement
Changes in intensity of competition
Regional trade areas
Established market in Europe, Japan & US 8 BALANCE OF PAYMENTS : BALANCE OF PAYMENTS The system of accounts that records a nations’ international financial transactions is called its balance of payments.
Record financial transactions ------- usually for one year.
Record maintained on double entry book keeping system.
It is record of condition, not a determinant of condition. 9 BALANCE OF PAYMENTS : BALANCE OF PAYMENTS Basically it presents;
Overall view of a nations’ international economic position.
Difference between receipt from foreign countries on one side and payments to them on the other. 10 BALANCE OF PAYMENTS : BALANCE OF PAYMENTS An important economic measure used by;
& other government agencies
Responsible to maintain external and internal economic stability. 11 BALANCE OF PAYMENTS : BALANCE OF PAYMENTS Plus side of US balance of paymets;
Merchandise export sales.
Money spent by foreign tourists.
Payments to US for insurance.
Transportation and similar services.
Payments of dividends and interest on investment abroad.
Return on capital invested abroad.
New foreign investmets in US.
Foreign Govt. paymets to the US. 12 BALANCE OF PAYMENTS : BALANCE OF PAYMENTS Minus side of US balance of payments;
Cost of goods imported.
Spending by the US tourists overseas.
Cost of foreign military and economic aid. 13 Payments Receipts International Deficit Export
More tourists from outside The Balance; BALANCE OF PAYMENTS : BALANCE OF PAYMENTS Include 3 types of accounts;
Current account (Important)
Record--- merchandise import, export, services, unilateral transfer of funds.
Record--- direct investment, portfolio investment, short term capital movement to and from the countries. 14 BALANCE OF PAYMENTS : BALANCE OF PAYMENTS Include 3 types of accounts;
Records--- import and export of gold, increase of decrease in foreign exchange, increase or decrease in liabilities to foreign central bank. 15 PROTECTIONISM : PROTECTIONISM The tariffs, quotas and non-tariff barriers designed to protect a country‘s market from intrusion by foreign countries.
Nations utilize legal, exchange and psychological barriers to restrain entry of unwanted goods.
While arguing for protection, the basic economic advantages of international trade are ignored. 16 PROTECTIONISM (Protection Logic and Illogic) : PROTECTIONISM (Protection Logic and Illogic) Arguments by protectionists supporting Govt. restrictions on trade.
Economists recognize as valid;
Protection of infant industry
Industrialization of underdeveloped countries.
Most protectionists argue the need for tariffs in one of above 3. 17 Slide 18: Arguments by protectionists supporting Govt. restrictions on trade.
Protection of home market
Need to keep money at home
Encouragement of capital accumulation.
Maintenance of standards of living and wages.
Conservation of natural resources
Maintenance of employment and reduction of unemployment
Increase of business size
Retaliation and bargaining
Etc. 18 PROTECTIONISM (Protection Logic and Illogic) Slide 19: Certain barriers are established by the Govt. to encourage the development of domestic industry and protect the existing industry.
Imposed against import and foreign business.
Inspiration may be economical or political
Encouraged by local industry 19 PROTECTIONISM (Barriers) Slide 20: Tariffs; (arbitrary, discriminatory and require supervision)
Tax imposed by Govt. on goods entering the border.
Special interest privileges
Govt. control and political considerations in economic matters
The number of tariffs. 20 PROTECTIONISM (Barriers) Slide 21: Tariff;
Balance of payments
Supply and demand pattern
International relations (trade wars)
Manufacturers supply source
Choice available to consumers
competitions 21 PROTECTIONISM (Barriers) Slide 22: Quotas
Specific unit or dollar limit applied to a particular type of good.
Put absolute restriction on quantity of a specific good to be imported.
Like tariff, quota tend to increase price.
Great Britin------ limits imported television sets
Germany ------ quotas on Japenese ball bearings
Italy ------ Japenese motorcycles
US ------ Sugar , textile etc. 22 PROTECTIONISM (Barriers) Slide 23: Voluntary Export Restraints (VERs)
Orderly Market Aggrements (OMSs)
Aggrement between the importing country and exporting country for a restrictions on volume of exports.
It is voluntary because the exporting country sets the limits.
Under threat; stiffer quotas and tariffs being set by importing countries
Japan has a VER on automobiles to US 23 PROTECTIONISM (Barriers) EASING TRADE RESTRICTIONS : EASING TRADE RESTRICTIONS The omnibus trade & competitiveness act
Correction of perceived in justice in trade practices
Openness of new market to US goods
Barriers to enter in new market
Majors ongoing activities to support growth of international trade
World Bank 24 The Dynamic environment of international trade GENERAL AGREEMENT ON TRADE & TARIFF - GATT : GENERAL AGREEMENT ON TRADE & TARIFF - GATT Background & history
Protection of domestic industry
Consultancy will be primary method for problem solving
Establishment of trade related investment measures
Investment restrictions as trade barriers 25 The Dynamic environment of international trade WORLD TRADE ORGANIZATION – WTO : WORLD TRADE ORGANIZATION – WTO Development as an institution
Equal representation of all member states
Role in product standardization & in other areas
International Monetary fund
Objectives & role
Objectives & functions 26 The Dynamic environment of international trade